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Arrest shuts down, and sheds light on, an Internet black market

Nearly everything about Silk Road was shrouded in secrecy.

It began in 2011 as an underground online marketplace for drug users, a site where an endless varieties of marijuana — as well as LSD, Ecstasy and prescription pills — could be bought from sellers around the world. It branched out to other illicit goods, including forged documents, and emerged as a black market version of eBay, where criminals could do business with more than 100,000 customers.

It worked on one basic principle: Everyone remained anonymous. Users could gain access to the network only through software meant to ensure anonymity. Credit cards and PayPal were not accepted. Bitcoins, a virtual currency, were, and even those transactions were scrambled. All that connected them in real life was a name, often fake, and the address to which the package would be sent.

And the mastermind behind Silk Road was cloaked in mystery, known as Dread Pirate Roberts, after a character in the movie The Princess Bride. But Silk Road went dark this week, and its owner was unmasked as Ross Ulbricht, 29, who is accused in a criminal complaint, among other things, of asking a man to kill a Silk Road vendor who had threatened to reveal the identities of others who used the site.

FBI agents confronted Ulbricht in a library in San Francisco on Tuesday and arrested him on narcotics and money-laundering charges.

The case, which is being coordinated by federal prosecutors in New York, is part of a larger push by federal authorities to police illicit commerce along the frontier of the Internet. A few high-profile cases have involved defendants overseas, which made it all the more noteworthy that the man accused of being behind Silk Road was in the United States and remained undetected for so long. He had been living with his parents in Austin, Texas, until last fall, when he moved to San Francisco to tap into its entrepreneurial spirit.

"I feel like the world is in flux," Ulbricht said, in a lengthy discussion with a childhood friend, Rene Pinnell, that appeared on YouTube last year. "I want to see where all this new technology goes."

His goals included starting a family, making more friends and having "a substantial positive impact on the future of humanity," according to the video, which makes no mention of Silk Road.

In San Francisco, Ulbricht carved out an anonymous life. He rented a room and told his two housemates his name was Josh, authorities said. One roommate reported that "Josh" was always in his room on the computer.

There, according to the federal complaint, he made a lot of money. The FBI obtained an image of Silk Road's Web server, which indicated the site had sales revenue of more than 9.5 million bitcoins, valued at about $1.2 billion.

Arrest shuts down, and sheds light on, an Internet black market 10/02/13 [Last modified: Wednesday, October 2, 2013 11:26pm]
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